Energy contracts to keep lights on

More firms will be encouraged to sign up to energy contracts which could see their power cut at times of peak demand under Government plans to help prevent blackouts.

Energy Secretary Ed Davey said it was a "sensible" plan to reduce demand, and hundreds of firms already had contracts which allowed that to happen in exchange for a financial benefit.

Mr Davey insisted "we are going to keep the lights on" and said there was an "investment renaissance" in the energy sector, with projects including nuclear and renewable generation.

Asked whether the plans included asking industry to close down or move production to off-peak times, Mr Davey said such measures already existed but were being expanded.

"What we are saying is if they want to, if they are prepared to do that and be paid for it, and it makes commercial sense for them that's a very sensible way," he told BBC1's Sunday Politics.

"This has been around for a long time, there are 200 of these contracts already out there, what we want to do is see if we can expand that."

Ofgem has warned that spare generating capacity could fall as low as 2%, increasing the risk if a power station is taken offline or cold weather increases demand.

But Mr Davey said: "We are going to keep the lights on, that's clear. When we came to power energy investment had been relatively low, the Labour Party failed to deal with Britain's energy deficit.

"From day one we have been pushing investment up massively."

The 2% figure did not take into account the actions being taken by the Government, including plans to bring mothballed plants back online and to use interconnectors with Europe to increase the supply of gas and electricity.

"This May National Grid will do an auction to allow those mothballed plants to come on," he said.

"If you talk to the industry there is gigawatts of power there that could come into that auction and we are not even just relying on that auction, we have got the interconnectors ... there's a whole range of other measures we can take and that's just in the short term."

Britain's Big Six energy suppliers face the threat of being broken up after regulators said they planned to refer the sector for a full-scale probe by the Competition Markets Authority (CMA).

Ofgem said soaring household bills and intensifying public distrust highlighted the need for an investigation which will determine whether the companies are making excess profits - after they quadrupled to more than £1 billion in three years.

British Gas owner Centrica warned that the probe, expected to last up to two years, could create uncertainty and threaten the billions of pounds worth of investment needed to keep the lights on.

But the chief executive of rival SSE, which has announced a freeze in prices, insisted that investment would continue.

Alistair Phillips-Davies said: "I don't think it is true for the end of investment. First of all, what we said to all the politicians was we've all got the same objective, to keep bills down, that's very important to all of us.

"We have invested £7.5 billion over the last five years and will be investing £1.6 billion over the next year."

He said Labour leader Ed Miliband's plan to legislate for a price freeze "resonated with the public", but the Government's reduction in green levies helped SSE cut bills and implement its own freeze.

He told the BBC's Andrew Marr Show: "We have written to all the political parties asking them to work with us to try and see ... if we can bring prices down, particularly if we look at things like levies on the bills.

"We just don't think it's fair that everybody pays the same amount, people in fuel poverty, people who are genuinely in hardship shouldn't be paying the same amount as people who aren't in such hardship. "

Shadow energy secretary Caroline Flint told Sky News: "What's become very clear is what David Cameron and the energy companies said was impossible about a price freeze is clearly possible and last week the reference to the CMA for a full competition review really reinforces what Labour has been saying for the last few years, this market is broken.

"But why should it be that only five million customers of SSE benefit from a price freeze when the Government's got it within its powers to modify the licences to make sure everybody benefits from the price freeze while this review is undertaken?

"That is what Labour is demanding next week, alongside with getting on with a package of reforms, it's absolutely necessary."

Asked whether it was better to leave it up to companies to freeze their own prices, Ms Flint said: "Absolutely not, that's what's been part of the problem. We've had piecemeal voluntary activities from the company, they end up with six different versions of what that reform should be.

"Governments are there to step in when markets fail and they are certainly there to set the framework for how markets should operate, whether that's in the energy market or any other market, banking for example.

"That is why we need to stop this piecemeal, voluntary activity that has dogged this area for so many years and get on with something that everybody can sign up to trust.

"Our price freeze is about allowing us, if we win the next election, to have 20 months to bring forward reform to this market to make it more transparent, more competitive and a better regulator, a tougher regulator, to make sure that watchdog stands up for customers."